Credit Report- Republic of Austria

8/3/2019 Credit Report- Republic of Austria

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Erste Group ResearchCredit Report | Government Bonds | Austria4 January 2012

Erste Group Research Credit Report Page 2

Diversified economy

Robust economy and institutions, strong competitive position.

Austria has a strong and diversified economy without any majorimbalances. Nominal GDP amounted to EUR 286.2 billion in 2010, which isan economic output of EUR 34,100 per capita. This makes Austria one ofthe most prosperous countries of the euro zone. Adjusted for purchasingpower, economic output per inhabitant was 17% above the euro areaaverage and 7% higher than Germany's. According to Eurostat, actualindividual consumption1 was 8% above the euro zone average. The basisfor this prosperity is a well-balanced and well-diversified economy.Furthermore, there are no signs of any general overheating of the realestate market. High expenditure on research and development (2.8% of

GDP in 2010) and the resulting innovation process as well as a highly skilledand flexible workforce make the Austrian economy one of the mostcompetitive of the euro area.

Above-average GDP per capitaNominally and in purchasing power standards,EUR 000s, 2010

Moderate rise in real estate pricesReal estate price index excluding Vienna

0

5

10

15

20

25

30

35

40

Austria Germany France Italy Spain

PPS nominal Eurozone

80

90

100

110

120

130

140

150

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

80

90

100

110

120

130

140

150

residential property price index consumer price index Source: Eurostat, Erste Group Research Source: OeNB, Erste Group Research

Prosperity is based on above-average GDP growth. At an average of

1.6% p.a. in real terms over the past ten years, GDP grew faster than theeuro area average (1.2%) and Germanys GDP (0.9%). After contracting in2009 (-3.8%), the domestic economy quickly recovered and has beenoperating above its pre-crisis level since the beginning of 2011. At aforecasted +3.3%, GDP growth was again above the average in 2011 andsurpassed general expectations. In the first three quarters of 2011, domesticeconomic output was up 3.9% over the same period of the previous year,while growth in the euro zone was running at a rate of only 1.8% and inneighbouring Germany at 3.5% over the same period.

1Actual individual consumption consists of goods and services consumed by private

households regardless of who bought or paid for them.


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Above-average long-term growth

Development of GDP, real and sadj., 2005=100

Exports and consumption are key contributors to GDP

Expenditure components, nominal values 2010

90

95

100

105

110

115

Q12005

Q32005

Q12006

Q32006

Q12007

Q32007

Q12008

Q32008

Q12009

Q32009

Q12010

Q32010

Q12011

Q32011

90

95

100

105

110

115

Austria Eurozone Germany

privateconsumption;

54.5%

governmentspending; 19.4%

investment;21,6%

net exports;4.3%

Source: Eurostat, Erste Group Research Source: Statistics Austria, Erste Group Research

Net exports and domestic demand are key drivers of growth. After theeconomic crisis of 2009, which saw a downturn especially in investmentactivity and exports, these two components as well as householdconsumption were the key drivers behind the rebound of GDP.

Investment activity, exports and householdconsumption are key growth drivers in AustriaContribution to real yoy GDP growth by component

Development of expenditureIn real terms and seasonally adjusted, in EUR million

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%8.0%

Q22005

Q42005

Q22006

Q42006

Q22007

Q42007

Q22008

Q42008

Q22009

Q42009

Q22010

Q42010

Q22011

priv. consumption gross investment publ. consumptionnet exports GDP

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,00045,000

Q12005

Q32005

Q12006

Q32006

Q12007

Q32007

Q12008

Q32008

Q12009

Q32009

Q12010

Q32010

Q12011

Q32011

pri vate consupt ion government spending investment expor ts impor ts Source: Eurostat, Erste Group Research Source: Eurostat, Erste Group Research

International competitiveness and low currency risk. Due to the peggingof the schilling to the currency of Austria's most important trading partnerGermany in 1980 and Austrias subsequent joining of the euro zone, thecountrys real effective exchange rate i.e. the weighted and price-adjustedexchange rate has been stable over the past decades. As more than halfof Austrian exports go to the euro zone, most of these exports areunaffected by exchange rate fluctuations, which strengthens the stability ofthe export sector even further. In 2002, the current account balance turnedpositive. The constant contribution of net exports to GDP is evidence ofAustrias international competitive strength. Moreover, Austria is a netinvestor internationally and hence less dependent on capital imports thanother countries. In view of this constancy and continuity, Austria is clearly

one of the hard currency countries within the euro zone.


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Current account surplus since 2002

Current account balance, in EUR million

Constant and high competitive strength

Real effective exchange rate (CPI), 2005=100

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

50

60

70

80

90

100

110

120

130

01/1980 01/1985 01/1990 01/1995 01/2000 01/2005 01/2010

50

60

70

80

90

100

110

120

130


Source: OeNB, Statistics Austria, Erste Group Research Source: OECD, Erste Group Research

Strength of institutions underpins social and political stability. Austriahas a transparent and efficient public sector and a strong record on the ruleof law. This is also reflected by top ratings in international rankings, amongthem, for example, the World Banks ranking of government effectiveness,which measures public sector quality and independence and the rule of lawindex of the World Bank, which measures the degree to which people haveconfidence in and abide by the rule of law. The political system isconsistently stable and of high transparency. The grand coalition of SocialDemocrats (SP) and Conservatives (VP) that has been in power since

2008 holds 59% of the seats in the National Council (lower house ofparliament) and has sufficient capacity to act. The coalition is moreoverseeking to keep the budget deficit, which has traditionally been low (lessthan 2% on the average 2000-2010), on a fiscal consolidation path.


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Flexible labour market

Austria boasts a highly educated and competitive workforce. Thisenabled the country to cope with the economic crisis of 2009 with only aslight rise in unemployment. This was facilitated by short-time workprogrammes, which allowed businesses to respond flexibly to falling orders.The long-standing and proven social partnership2 system combined with thetraditionally low strike rates also contributed to the strong competitiveposition that the Austrian economy enjoys internationally. This is reflected inparticular by moderate wage rises and the resulting moderate developmentof unit labour costs and above-average labour productivity.

Above-average rise in productivity

Real labour productivity per employee, index

Moderate development of unit labour costs

In real terms, index 2000=100

95

97

99

101

103

105

107

109

111

113

115

Q12000

Q42000

Q32001

Q22002

Q12003

Q42003

Q32004

Q22005

Q12006

Q42006

Q32007

Q22008

Q12009

Q42009

Q32010

95

97

99

101

103

105

107

109

111

113

115


90

92

94

96

98

100

102

104

106

108

110

Q12000

Q42000

Q32001

Q22002

Q12003

Q42003

Q32004

Q22005

Q12006

Q42006

Q32007

Q22008

Q12009

Q42009

Q32010

Q22011

90

92

94

96

98

100

102

104

106

108

110


Source: Eurostat, Erste Group Research Source: Eurostat, Erste Group Research

Austrias harmonised unemployment rate currently stands at 4.1%.However, this low level of unemployment is attributable in part to a loweffective retirement age (acc. to OECD: 58.9 years). In this regard, thefederal government already announced that the practice of early retirementat Austrias state railways (with a workforce of 44,000 one of Austriaslargest employers) would be discontinued as of the beginning of 2012.Measures of this kind are definitely welcome in our opinion, with a view toefficient fiscal consolidation and a long-term decline in total debt.

Lowest unemployment rate in the EUHarmonised unemployment rate, in %

Long-term unemployment rate is stable and lowHarmonised unemployment rate, in %

0

5

10

15

20

25

AT LU NL DE FI IT FR GR ES

Eurozone

0

2

4

6

8

10

12

14

01/2005

07/2005

01/2006

07/2006

01/2007

07/2007

01/2008

07/2008

01/2009

07/2009

01/2010

07/2010

01/2011

07/2011

0

2

4

6

8

10

12

14

Austria Eurozone Germany Source: Eurostat, Erste Group Research Source: Eurostat, Erste Group Research

2It consists of the Chambers of Commerce, Agriculture and Labour and the Austrian Trade

Union Federation.


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Above-average GDP growth

GDP growth subdued in 2012, expected to pick up again in 2013

The continuing anxiety caused by the euro zones sovereign debt crisis andthe resulting uncertainty over the future development of the economy areweighing on consumer and manufacturer sentiment. Implementation of themeasures agreed at the European level and further steps towards aresolution of the sovereign debt crisis might slowly restore confidence in the2nd half of 2012. Accordingly, we expect a more pronounced economicrecovery in 2013.

Moderate external demand expected for 2012 amid slowdown of globalgrowth. After the 2009 crisis, exports recovered briskly, with Germany

remaining the key export market with a share of more than 30%. In thesecond half of 2011, export momentum slowed a little but remained at asolid level. Because of the global slowdown of growth, (net) exports shouldmake a significantly more moderate contribution to GDP than last year. For2013 we expect growth to pick up, though.

Euro zone is Austria's key export marketExport markets January-September 2011

Focus of goods exportsGoods exported January-September 2011

rest of EU16.8%

Italy7.6%

Germany31.3%

rest of Eurozone14.3%

Switzerland4.8%

Oceania0,6%Asia

9.1%America

7.5%Africa1.2%

rest of Europe6.8%

other manuf.

goods11.3%

other goods2.8%

manufacturedgoods23.7%

mineral fuels,

lubricants3.2%

chemicals andrelated products

12.8%

machinery andtransport

equipment37.6%

crude materials3.3%

food5.2%

Source: Statistics Austria, Erste Group Research Source: Statistics Austria, Erste Group Research

Household consumption supports the economy. With a 55% share ofGDP, household consumption is the largest expenditure component and hasdeveloped solidly over the past few years. Even in 2009, householdconsumption contributed to GDP (-3.8%) stabilisation with low negativegrowth of -0.3% yoy. Low unemployment and the rise in real wages overrecent years probably contributed to the solid performance of householdconsumption. Additional support has come from the decline in the savingsratio since 2009. Next year, inflation should subside a little and real wagesare expected to rise. With consumer sentiment clouding, one may assumehowever, that household consumption will tend to be subdued in 2012before picking up more vigorously in 2013.


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Savings ratio slightly down

Private households savings ratio

Moderate rises in real wages

Gross wages/full-time equivalent inflation, in % yoy

0

2

4

6

8

10

12

14

16

18

20

2001Q1-2001Q4

2001Q3-2002Q2

2002Q1-2002Q4

2002Q3-2003Q2

2003Q1-2003Q4

2003Q3-2004Q2

2004Q1-2004Q4

2004Q3-2005Q2

2005Q1-2005Q4

2005Q3-2006Q2

2006Q1-2006Q4

2006Q3-2007Q2

2007Q1-2007Q4

2007Q3-2008Q2

2008Q1-2008Q4

2008Q3-2009Q2

2009Q1-2009Q4

2009Q3-2010Q2

2010Q1-2010Q4

2010Q3-2011Q2

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: Statistics Austria, Erste Group Research Source: OeNB, Erste Group Research

Uncertainty weighs on investment activity. It is especially the uncertaintyregarding consumer demand that might cause businesses to postponecapital spending next year. We therefore do not anticipate any substantialcontribution of investment activity to 2012 GDP. The emerging dip ininvestment activity should then be followed in 2013 by a rebound and mightthen make a superproportionately large contribution to aggregate growthowing to catch-up effects.

Investment growth expected to slow in AustriaInvestment activity and manufacturer sentiment (AT)

Retail sales may declineRetail sales index and consumer sentiment (AT)

90

92

94

96

98

100

102

104

106

108

110

02/2000 02/2002 02/2004 02/2006 02/2008 02/2010

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

OECD Industrial Confidence gross fixed capital formation y/y (rhs)

90

92

94

96

98

100

102

104

106

108

110

01/2000 01/2002 01/2004 01/2006 01/2008 01/2010

-4%

-2%

0%

2%

4%

6%

8%

OECD Consumer Confidence retail sales index y/y (rhs)

Source: OECD, Eurostat, Erste Group Research Source: OECD, Eurostat, Erste Group Research

Overall, the Austrian economy will not be able to escape the impactsof the debt crisis. Against the backdrop of declining external demand andsubdued domestic demand, we expect the economy to grow at a rate of0.9% in 2012. In 2013, economic growth should accelerate again to 2.0%.


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Low debt

In the private sector, the relative debt levels of both private households andbusinesses are significantly below the euro zone average. Moreover, thehigh savings ratio and the resulting high levels of privately held assets(which according to OeNB amount to about 175% of GDP) provideadequate funding to both the corporate sector and the state, whichtraditionally is a net debtor.

Debt below euro zone averageLoans with short and long maturities, other fin. Instr., in % of GDP (2010)

0%

20%

40%

60%

80%

100%

120%

corporate household

Austria Eurozone Source: OeNB, ECB, Erste Group Research

At 72.2% of GDP, Austrias public debt is lower than Germanys(81.7%) and lower than the euro zone average (88.0%). Strict control ofexpenditure and a good economic development have kept total debt withinlimits during the crisis years.

Austrias debt is lower than that of other states

Comparison of key debt ratios (in % of GDP)

Country 2011 2012 2013 2011 2012 2013Austria 72.2 73.3 73.7 -3.4 -3.1 -2.9Eurozone 88.0 90.4 90.9 -4.1 -3.4 -3.0Germany 81.7 81.2 79.9 -1.3 -1.0 -0.7Finland 49.1 51.8 53.5 -1.0 -0.7 -0.7

France 85.4 89.2 91.7 -5.8 -5.3 -5.1Greece 162.8 198.3 198.5 -8.9 -7.0 -6.8Ireland 108.1 117.5 121.1 -10.0 -8.6 -7.8Italy 120.5 120.5 118.7 -4.0 -2.3 -1.2Netherlands 64.2 64.9 66.0 -4.3 -3.1 -2.7Portugal 101.6 111.0 112.1 -5.8 -4.5 -3.2Spain 69.6 73.8 78.0 -6.6 -5.9 -5.3

gross debt deficit

Source: European Commission (Autumn Forecast), Erste Group Research

The inclusion of extra-budgetary debt might increase public debtlevels. Even though the Austrian state's current total debt is lower thanGermany's or the euro zone's, the level of public debt might increase. InMarch 2011, reclassifications triggered by changes in the European System

of Accounts (ESA) resulted in an upward revision of Austrias public debt by3.4 percentage points (in terms of GDP). This was mainly attributable to theinclusion of debt incurred by BB (the state railways) and public hospitals.


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Another ESA reform in 2014 might result in further entities being reincluded

in public debt data. According to the Austrian State Debt Committee, thelong-term liabilities of public-sector companies (which are offset in part byassets) amount to more than EUR 30 billion. Their inclusion would drive uppublic debt by another 11% of GDP. In addition, the debts of previouslyhived-off companies may have to be recognised at Laender or localgovernment level. However, a change in these rules would affect all EUmember states equally. It is therefore to be expected that in such a casehived-off debt would also have to be recognised in other countries.

So-called debt brake is expected to limit new debt. To counteract afurther rise in public debt, the Austrian federal government agreed inDecember 2011 to establish a debt limit by passing a regular law designedto guarantee fiscal consolidation. As of the financial year 2017, this law will

limit the federal government's structural deficit to 0.35% of GDP.Additionally, a limit of 0.1% agreed with Laenderand local governments is toensure long-term consolidation at these levels as well.

The debt limit adopted at the European level provides for a maximumstructural deficit of 0.5% of GDP, which should be written into theconstitution by the end of 2012. As Austrias structural deficit in 2011 run at3.1% of GDP according to European Commission estimates, majorconsolidation efforts will be needed over the medium term to attain thetargets set. From our perspective, there is much scope and need to act inthe healthcare and pensions sectors. Raising the effective retirement agemight contribute to cutting the structural deficit to the required level. Inaddition, there is potential for cutting spending in public administration and

expenditure on subsidies and funding programmes.


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Top ratings

Austria has received top marks from all of the three rating agencies.Moodys and Fitch added that the outlook remains stable, while Standard &Poor's lowered the outlook for Austria and all of the five other triple-Acountries of the euro zone (Germany, France, Finland, Netherlands,Luxembourg) to credit watch negative in view of the euro zones systemicrisk.

The rating agency Moodys confirmed Austrias top rating and the stableoutlook on 23 December 2011. The agency noted, however, that the stableoutlook depended increasingly on a resolution of the euro zone crisis.

Credit ratings of the Republic of AustriaTop ratings from all major agencies

outlook

Agency long-term since short-term since

Moody's P-1 1999 Aaa 1977 stableStandard and Poor's A-1+ 1986 AAA 1975 watch neg.Fitch F1 1995 AAA 1994 stable

debt

Source: Bloomberg, Erste Group Research

Among Austrias key strengths, the rating agencies name primarily itslong-term social and political stability, the highly skilled workforce,and the well-diversified economy. They additionally emphasise the

traditionally prudent management of fiscal resources. Moodys awarded topmarks in three out of four sub-categories, and only deducted a point forsusceptibility to risks, highlighting two core risks (see next page).

Best marks for economic resilience and financial strengthMoodys ratingEconomic How strong is the economic structure?

Strength

very high high moderate low very low

Economic Resiliency

Institutional + -

Strength


Financial RATING RANGE

Strength Aaa - Aa2


Susceptibility

to event risk + -

very low low moderate high very high Financial Robustness

How robust are the istitutions and how predictable are thepolicies?

How does the debt burden compare with the government'sresource mobilization capacity?

What is the risk of a direct and sudden threat to debtrepayment?

Source: Moodys, Erste Group Research


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1) The exposure of Austrian banks in Central and Eastern Europe,

which is classified by Moodys as generally manageable. According tothe Austrian central bank (OeNB), consolidated claims of Austrian banks tocountries in the region amounted to about EUR 224 billion in Q1 2011.However, these assets were broadly diversified across countries, whichhelps to limit risk. In addition, these assets are accompanied by depositswith banks. On average, loans to non-banks are funded 92% by localdeposits.

Nonetheless, to counter this risk, OeNB and Austrias Financial MarketAuthority adopted a package of measures designed to strengthen thesustainability of Austrian banks operations in CEE and to provide forimplementation of the Basel III rules from as early as 1 January 2013. Thepackage also calls for the loan-to-deposit ratio of new business not to

exceed 110% and for an additional core capital buffer of up to 3%.

The Austrian banks generally already boast a solid equity base. At mid-2011, the consolidated core capital ratio of all Austrian banks subject toreporting obligations was 10.3%. The loan-to-deposit ratio of 109% and thesolvency ratio of 13.5% likewise reflect the Austrian banks, on average,robust capitalisation.3

2) Hived-off debt is a potential risk factor. By introducing the debt limitmentioned above, the government reacted, indirectly, to this second corerisk and took steps to contain total debt levels. Austria thus met acharacteristic criterion of Aaa countries, namely the ability to implement

measures quickly and resolutely when problems emerge.

Both measures were noted positively by the rating agencies. Risks leadingto a downgrading might materialise if the credit metrics were to deterioratesubstantially and permanently and/or if at-risk euro zone states woulddefault on payments temporarily and a series of exits from the euro zone. Inthe latter case, the ratings of other euro member states holding triple-Aratings would be at risk as well, however.

3 Source: OeNB: Facts on Austria and its Banks (October 2011)


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Low funding risk

Efficient management of public debt funding and well-balancedmaturity profile. Austria's low debt-rollover ratio4 (4.8%) and the averageresidual maturity of 8.4 years reflect the countrys low funding risk andsound diversification of the maturity profile. The countrys strong debtservicing capacity can be seen from its low interest expenditure relative topublic revenues (6%). Relative to GDP, Austrias interest expenditure islikewise low at 2.7% (EZ: 3.0%). The state raises funds mainly by issuingeuro-denominated bonds, 97% have fixed interest payments. In 2009, grossissuance volume was EUR 33 billion, in 2010 and 2011 27 and 21 billion,respectively. In 2012, one or two syndicated bond issues are being plannedwith a total volume of between EUR 27 and 30 billion.

Well-balanced maturity profileBonds and money-market paper at current ex. rates

Bonds are an important funding instrumentFederal government debt as of Nov. 11

0

5,000

10,000

15,000

20,000

25,000

30,000

2011

2013

2015

2017

2019

2021

2023

2025

2027

2029

2031

2033

2035

2037 bonds (Euro)

87.6%

treasury bills(Euro)2.1%

loans banks andinsurances

(Euro)7.6%

foreign currencydebt1.4%

rest (Euro)1.3%

Source: Bloomberg, Erste Group Research Source: OeBFA, Erste Group Research

Well-diversified creditor pool with slightly falling percentage ofexternal debt. About 80% of Austrian government bonds are held in theeuro zone "home market", primarily in stable regions such as Austria,Germany, and France.

Euro area as core marketSyndicated RAGB emissions 2008-2011

Investors with preference for safe assetsCreditors by category (RAGB 2008-2011)

0% 10% 20% 30% 40% 50% 60%

Middle East

America

Africa

Asia

rest of Europe

rest of Eurozone

Austria

0% 5% 10% 15% 20% 25% 30% 35%

other

retail

Insurances andpens. funds

central banks & int.org.

asset managers

banks

Source: OeBFA, Erste Group Research Source: OeBFA, Erste Group Research

4 Last years issues with short maturities plus this years maturing medium and long-term debtrelative to GDP.


13/16



Stable yields

Yield spread over Germany has potential for narrowing

Continuing uncertainty and low interest rates weigh on benchmarkyields. While the prospect of further rate cuts depresses yield levels, theeuro zone's sovereign debt crisis gives rise to short-term fluctuationsreflecting whether efforts to find a solution make progress or suffersetbacks. As we do not expect a big "final resolution" of the sovereign debtcrisis but a series of small steps in a continuing "work in progress" process,yields may expected to be volatile in the near future. With rate expectationslow, we forecast that yields on 10-year Germans Bund will rise only verymoderately over a period of one year.

Low key interest rate depresses yieldsForecast of euro zone benchmark yields (%)

0

0.5

1

1.5

2

2.5

2 3 4 5 6 7 8 9 10

Current Mar. 12 Jun.12 Sep.12 Dec.12 Source: Bloomberg, Erste Group Research

If systemic risks emerge in the euro zone, benchmark yields may rise.Rating agencies have recently increasingly stressed the systemic risk in theeuro zone. Rating downgrades would indeed render bailout operations moredifficult. If investors become increasingly concerned about the euro zone,the yields of German Bunds might rise.

Austrian yield spread has potential to narrow. A look at the yield spreadsof selected triple-A countries over Germany in the chart below reveals asimilar pattern for Austria (recently 115 bps) and France (134 bps).From our point of view, however, Austria enjoys a number of advantagesover France, though. Moodys, for example, commended Austria for its longperiods of fiscal restraint and low deficits, while criticising Frances relativehigh levels of government expenditure and public debt. France has indeedone of the worst sets of credit ratios among the triple-A states. With regardto France, Moody's also underlines that the country unlike Austria willfeel a negative effect from the global economic slowdown. Moreover, Francehas a higher funding risk with a significantly higher debt-rollover ratio of 14%(Austria: 4.8%). For fundamental reasons, it therefore does not seemjustified that Austrias yield spread should be of a similar size as France's.

ield spreads over DE, in bps

current median 10y

Austria 115 11.2Finland 48 10.8France 134 8.0Netherlands 39 9.9

Source: Bloomberg, Erste Group Research

Debt ratios AT, FR

deficit gross debtAustria -3.4 72.2France -5.8 85.4

Source: European Commission


14/16



The yield spreads of other comparable triple-A issuers such as the

Netherlands or Finland currently range from 39 to 48 basis points. In ouropinion, the Austrian yield spread therefore has potential for furthernarrowing.

Widening of yield spreadsPremium over German Bunds, 10y

Significant widening in 2009 and 2011Premium over German Bunds, 10y

0.0

0.5

1.0

1.5

2.0

01/2010

04/2010

07/2010

10/2010

01/2011

04/2011

07/2011

10/2011

01/2012

0.0

0.5

1.0

1.5

2.0

Finland Netherlands France Austria

-0.2

0.2

0.6

1.0

1.4

1.8

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

average since 1999

Source: Bloomberg, Erste Group Research Source: Datastream, Erste Group Research


15/16



Contacts

Group Research Research, SlovakiaHead of Group Research Head: Juraj Barta, CFA (Fixed income) +421 2 4862 4166Friedrich Mostbck, CEFA +43 (0)5 0100 - 11902 Sona Muzikarova (Fixed income) +421 2 4862 4762Macro/Fixed Income Research Maria Valachyova (Fixed income) +421 2 4862 4185Head: Gudrun Egger, CEFA (Euroland) +43 (0)5 0100 - 11909 Research, UkraineAdrian Beck (AT, SW) +43 (0)5 0100 - 11957 Head: Maryan Zablotskyy (Fixed income) +38 044 593 - 9188Mildred Hager (US, JP, Euroland) +43 (0)5 0100 - 17331 Ivan Ulitko (Equity) +38 044 593 - 0003Alihan Karadagoglu (Corporates) +43 (0)5 0100 - 19633 Igor Zholonkivskyi (Equity) +38 044 593 - 1784Peter Kaufmann (Corporates) +43 (0)5 0100 - 11183

Carmen Riefler-Kowarsch (Covered Bonds) +43 (0)5 0100 - 19632 Treasury - Erste Bank ViennaElena Statelov, CIIA (Corporates) +43 (0)5 0100 - 19641 Saving Banks & Sales RetailMacro/Fixed Income Research CEE Head: Thomas Schaufler +43 (0)5 0100 - 84225Co-Head CEE: Juraj Kotian (Macro/FI) +43 (0)5 0100 - 17357 Equity Retail SalesBirgit Niessner (Macro/FI) +43 (0)5 0100 - 18781 Head: Kurt Gerhold +43 (0)5 0100 - 84232CEE Equity Research Fixed Income & Certificate SalesCo-Head: Gnther Artner, CFA +43 (0)5 0100 - 11523 Head: Uwe Kolar +43 (0)5 0100 - 83214Co-Head: Henning Ekuchen +43 (0)5 0100 - 19634 Treasury Domestic Sales

Gnter Hohberger (Banks) +43 (0)5 0100 - 17354 Head: Markus Kaller +43 (0)5 0100 - 84239Franz Hrl, CFA (Steel, Construction) +43 (0)5 0100 - 18506 Corporate Sales ATDaniel Lion, CIIA (IT) +43 (0)5 0100 - 17420 Head: Christian Skopek +43 (0)5 0100 - 84146

Christoph Schultes, CIIA (Insurance, Utility) +43 (0)5 0100 - 16314 Fixed Income & Credit Institutional SalesThomas Unger; CFA (Oil&Gas) +43 (0)5 0100 - 17344 Institutional Sales InternationalVera Sutedja, CFA (Telecom) +43 (0)5 0100 - 11905 Head: Christoph Kampitsch +43 (0)5 0100 - 84979Vladimira Urbankova, MBA (Pharma) +43 (0)5 0100 - 17343 Institutional Sales AustriaMartina Valenta, MBA (Real Estate) +43 (0)5 0100 - 11913 Head: Thomas Almen +43 (0)50100 - 84323Gerald Walek, CFA (Machinery) +43 (0)5 0100 - 16360 Martina Fux +43 (0)50100 - 84113International Equities Michael Konczer +43 (0)50100 - 84121Hans Engel (Market strategist) +43 (0)5 0100 - 19835 Marc Pichler +43 (0)50100 - 84118Stephan Lingnau (Europe) +43 (0)5 0100 - 16574 Institutional SolutionsRonald Stferle (Asia) +43 (0)5 0100 - 11723 Head: Zachary Carvell +43 (0)50100 - 83308Editor Research CEE Brigitte Mayr +43 (0)50100 87481Brett Aarons +420 956 711 014 Mikhail Roshal +43 (0)50100 87487Research, Croatia/Serbia Institutional & High End SalesHead: Mladen Dodig (Equity) +381 11 22 09 178 Head: Patrick Lehnert +43 (0)5 0100 - 84259Head: Alen Kovac (Fixed income) +385 62 37 1383 Antony Brown +44 20 7623 - 4159

Anto Augustinovic (Equity) +385 62 37 2833 Abdalla Bachu +44 20 7623 - 4159Ivana Rogic (Fixed income) +385 62 37 2419 Lukash Beeharry +43 (0)50100 - 84125Davor Spoljar, CFA (Equity) +385 62 37 2825 Ulrich Inhofner +43 (0)50100 - 84324Research, Czech Republic Margit Hraschek +43 (0)50100 - 84117Head: David Navratil (Fixed income) +420 224 995 439 Institutional Sales GermanyPetr Bittner (Fixed income) +420 224 995 172 Head: Jrgen Niemeier +43 (0)50100 - 85503Petr Bartek (Equity) +420 224 995 227 Marc Friebertshuser +43 (0)50100 - 85540Vaclav Kminek (Media) +420 224 995 289 Sven Kienzle +43 (0)50100 - 85541Jana Krajcova (Fixed income) +420 224 995 232 Michael Schmotz +43 (0)50100 - 85542Martin Krajhanzl (Equity) +420 224 995 434 Sabine Loris +43 (0)50100 - 85543Martin Lobotka (Fixed income) +420 224 995 192 Carsten Demmler +43 (0)50100 - 85580Lubos Mokras (Fixed income) +420 224 995 456 Jrg Moritzen +43 (0)50100 - 85581Research, Hungary Rene Klasen +43 (0)50100 - 85521Head: Jzsef Mir (Equity) +361 235-5131 Klaus Vosseler +43 (0)50100 - 85560Bernadett Papp (Equity) +361 235-5135 Milosz Chrustek +43 (0)50100 - 85522Gergely Gabler (Equity) +361 253-5133 Andreas Goll +43 (0)50100 - 85561Zoltan Arokszallasi (Fixed income) +361 373-2830 Mathias Gindele +43 (0)50100 - 85562Research, Poland Institutional Sales CEETomasz Kasowicz (Equity) +48 22 330 6251 Head: Jaromir Malak +43 (0)50100 - 84254Piotr Lopaciuk (Equity) +48 22 330 6252 Sales CEEMarek Czachor (Equity) +48 22 330 6254 Pawel Kielek +48 22 538 62 23Research, Romania Piotr Zagan +43 (0)50100 - 84256Head: Lucian Claudiu Anghel +40 37226 1021 Ciprian Mitu +43 (0)50100 - 84253Head Equity: Mihai Caruntu (Equity) +40 21 311 2754 Institutional Sales SlovakiaDorina Cobiscan (Fixed Income) +40 37226 1028 Head: Peter Kniz +421 2 4862-5624Dumitru Dulgheru (Fixed income) +40 37226 1029 Sarlota Sipulova +421 2 4862-5629Eugen Sinca (Fixed income) +40 37226 1026 Institutional Sales Czech RepublicRaluca Ungureanu (Equity) +40 21311 2754 Head: Ondrej Cech +420 2 2499 - 5577Research Turkey Pavel Zdichynec +420 2 2499 - 5590Head: Erkin Sahinoz (Fixed Income) +90 212 371 2540 Milan Bartos +420 2 2499 - 5562Sevda Sarp (Equity) +90 212 371 2537 Radek Chupik +420 2 2499 - 5565Evrim Dairecioglu (Equity) +90 212 371 2535 Institutional Sales CroatiaOzlem Derici (Fixed Income) +90 212 371 2536 Head: Darko Horvatin +385 (0)6237 - 1788Mehmet Emin Zumrut (Equity) +90 212 371 2539 Natalija Zujic +385 (0)6237 - 1638

Institutional Sales HungaryNorbert Siklosi +36 1 235 - 5842

Institutional Sales RomaniaHead: Valentin Popovici +40 21 310-4449 - 59Ruxandra Carlan +40 21 310-4449 - 612


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Erste Group Research

Credit Report | Government Bonds | Austria4 January 2012


Disclaimer

This Analysis (the Report) was prepared by Erste Group Bank AG (the Erste Group) to provide its clients with additional backgroundinformation about the Republic of Austria (the Country). This Report is based on the level of knowledge of the person entrusted with theircompilation on the date of this Report and is subject to change without notice. It is being furnished solely for general information and doesneither constitute an investment advise or recommendation nor an offer, solicitation or recommendation of any offer, to subscribe, to buy orsell or to participate in the financial instrument referred to herein or in any financial instruments that relates to the Country (collectively theFinancial Instrument) or to engage in any trading strategy involving them. All illustrations, analyses and conclusions contained herein are ofa general nature. This Report neither provides a full and complete overview of the transaction itself, the potential risks and consequences,nor take into account the individual circumstances and needs of any particular investors regarding income, taxes and risk tolerance, orwhether the Financial Instrument is a suitable investment for them. It therefore must not be regarded as a substitute for obtaining individualadvise. The illustrated market performance and sample calculations cannot provide reliable predictions about the future performance. Pastperformance is not necessarily indicative for future performances and transactions in financial instruments can be considered risky orspeculative. The lower the credit rating of the issuer is, the higher is the risk of the investment. Since not all transactions are suitable forevery investor, prior to the entering into any transaction the investor shall consult its independent advisors (including but not limited to legaland tax advisor), to make sure that, irrespective of the information herein, the planned investment fits into the investors needs andpreferences and that the involved risks are fully understood by the investor and that after due consideration the investor is convinced that

s/he wish to enter into the planned transaction, is able to do so and can bear the economic consequences. The Austrian SecuritiesSupervision Act 2007 customer information must be taken into account by the investor. Financial analyses, if conducted by our FinancialAnalysis department, are in compliance with all legal requirements. The authors of this Report have no authority to make any representationor warranty on behalf of the Subject, Erste Group, or any other person. Although the information herein has been obtained from, and anyopinions herein are based upon, sources believed reliable, Erste Group (including its employees and/or representatives) makes norepresentation and warranty, express or implied, to the accuracy, completeness and correctness of the information, opinions, analysis orconclusion in this Report. Neither Erste Group nor any of its employees and/or representatives, nor any other person shall be liable for anylosses or damages whatever its nature is (including but not limited to any direct, indirect or consequential loss or loss of profit) and which mayresult from reliance upon this Report. No part of the authors compensation was, is or will be directly or indirectly related to the specific viewscontained in this Report. From time to time, Erste Group, companies affiliated with it and the principals or employees of Erste Group and itsaffiliates respectively may have a position in the Financial Instrument or hold options, warrants or rights with respect thereto or other financialinstruments of such issuers and may make a market or otherwise act in transactions in any of these financial instruments. Erste Group,companies affiliated with it and/or the principals or employees of Erste Group and/or its affiliates may from time to time provide investmentbanking or consulting services to the Country. The distribution of this Report and the Financial Instrument is restricted or prohibited in certainjurisdiction such as, inter alia, Australia, Canada, Great Britain, Japan and the United States of America. In particular, this Report may not bedistributed and the Financial Instrument may not be offered or sold within the United States of America or to, or for the account or benefit of,

any U.S. Persons (as defined in Regulation S under the U.S. Securities Act of 1933 as amended) unless an exemption under U.S. law or thestate laws in the United States is applicable. Persons into whose possession this Report comes are required by Erste Group to informthemselves about and to observe such restrictions. Additional information can be obtained from Erste Group upon request. Erste Group is nota registered broker-dealer under the U.S. Securities Exchange Act of 1934, as amended, or under applicable state laws in the United States.Erste Group Bank AG is regulated by the Financial Service Authority for the conduct of investment business in the UK. This Report and theinformation, analysis, opinions and conclusions it contains, are protected by copyright. Erste Group reserves the right to modify the viewsexpressed herein at any time and without notice. Erste Group reserves the right not to update this information or to discontinue italtogether without notice. Any statement herein is non-binding and without any obligation. Erste Group is not responsible for printing ortypographical errors. Erste Group 2012.

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Credit Report- Republic of Austria

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Transcript of Credit Report- Republic of Austria